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Court of Appeal stands firm on stay of landlord possession claims

Published: Thursday 23 July 2020

The Court of Appeal has given important clarity and breathing space to commercial and residential tenants in its recent judgment in TFS Stores Ltd v BMG (Ashford) Ltd & Ors [2020] EWCA Civ 833 by confirming that all parts of proceedings involving a claim for possession brought by a landlord are automatically stayed.

The stay, imposed initially by Practice Direction 51Z, and now extended to 23 August 2020 by the new CPR rule 55.29, applies to all claims (apart from some claims against trespassers) “brought under Part 55”. In his earlier judgment in Hackney LBC v Okoro [2020] 4 WLR 85, the Chancellor, Sir Geoffrey Vos, emphasised that all claims initiated under Part 55 were stayed, even if they were now on appeal.

In this case, DLA Piper, instructing Joanne Wicks QC of Wilberforce Chambers and Mark Galtrey of Falcon Chambers, acted on behalf of TFS Stores Ltd, who operate 198 fragrance shops across the UK. In 2017, the landlords of six of TFS’s shops asserted that the leases had been contracted out of the protection of the Landlord and Tenant Act 1954 (‘the Act’), and so that they were entitled to possession of the premises when the contractual term expired. TFS disagreed, saying that the contracting out process had not been properly followed. At a trial last summer, the High Court found against TFS, and made orders for possession in relation to five of the shops albeit postponed until the outcome of any appeal.

The Court of Appeal gave permission to appeal and listed the appeal for 24 June 2020. The point under appeal is a very important one, since the contracting out method used by the landlords is very widely used and its validity may affect the status of tens of thousands of commercial leases.

Following the decision in Okoro, it seemed to TFS that the appeal should be postponed because the proceedings were stayed.

Had the proceedings simply been started as claims for possession by the landlords, there would have been no argument: such claims must be brought under Part 55 and are certainly caught by the stay. However, in this case, there were two sets of proceedings, and neither started in that way.

The first set of proceedings were brought by TFS: the contractual terms on two of the shops had expired and so if the landlords were right, they could re-enter the premises at any time. TFS issued a claim for an injunction to prevent the landlords taking possession, and for a declaration that the leases were not contracted out of the Act. The landlords counterclaimed for possession.

Shortly afterwards, the landlords brought the second set of proceedings in relation to the other four shops, where the contractual term had not yet expired. At that time the landlords were not entitled to possession on any view, and so they claimed a declaration that the leases had been validly contracted out of the Act. But by the end of the trial, the contractual terms on three of the leases had expired. The landlords threatened to apply to amend their pleadings, or to issue separate claims for possession, unless TFS agreed to possession orders being made. On the basis of the High Court’s findings there would be no defence to a possession claim, and so TFS pragmatically agreed to the making of possession orders, postponed until after the outcome of the appeal.

The result was that neither set of proceedings was initiated under Part 55, but in both sets of proceedings possession orders were made and appealed against. The question for the Court of Appeal was whether the proceedings had been “brought” under Part 55 and so were stayed, and if they were, whether the stay should be lifted.

The landlords, represented by Wayne Clark and Joe Ollech of Falcon Chambers, argued that where a claim was correctly brought under the ordinary Part 7 procedure, it did not transform into proceedings brought under Part 55 because of later events that brought a claim (or order) for possession into the proceedings.

Arnold LJ, dissenting, agreed, pointing out that Part 55 has a whole raft of procedural requirements and differences from the Part 7 regime. This point has some force: certainly it is not standard practice when counterclaiming for possession (or amending to claim possession) for all the requirements of Part 55 to be followed, and they were not followed in this case. Given the views of the majority however, this is an important practice point: when drafting counterclaims for possession it would be now be prudent to follow the Part 55 procedure to avoid any suggestion that the claim was not properly brought.

The Chancellor and Asplin LJ, however, put more store by the policy aims of the automatic stay. As the Chancellor said at [33] – [34], referring to his judgment in Arkin v Marshall [2020] EWCA Civ 620:

As Ms Wicks correctly emphasised and, as we said in Arkin at [42], the purpose of the stay “is of its nature blanket in character and does not allow for distinctions between cases where the stay may operate more or less harshly on (typically) the claimant”. At [44], we said that “[t]he blanket stay has been imposed to protect public health and the administration of justice generally”…It is clear that the policy intention was to extend the stay on possession proceedings, even though that might “act to the detriment of some small businesses”, for example these landlords. It would send entirely the wrong message if we were to continue to hear an appeal in what must properly be regarded as possession proceedings on the technical ground that a part of the claim is for a declaration as to the law underlying that claim for possession.

TFS also argued that exposing tenants to the stress and expense of opposing with applications to lift the stay would undermine an important  purpose of the stay: to give tenants a period of time free from the risk of possession proceedings. Lifting the stay in this case, even to deal with the legal arguments about, would again send mixed messages and encourage further applications to lift the stay, undermining the stay.

The majority agreed (Arnold LJ would have lifted the stay), and the Chancellor was critical of the decision of Freedman J in Copeland v Bank of Scotland [2020] EWHC 1441 (QB), where the stay was lifted to hand down a reserved judgment, saying emphatically at [36]:

 I do not agree that that was the appropriate course. A stay means what it says. If the proceedings are stayed, nothing can happen in court at all

It might be thought that this clear message would reach courts at all levels and provide a period of stability until the stay is lifted. However, it seems that the position is not seen quite so clearly across the judiciary: on 07 July 2020, a week after the TFS judgment, a differently constituted Court of Appeal gave judgment in Jarvis v Evans [2020] EWCA Civ 854, a second appeal against a possession order granted to a landlord against a residential tenant in Wales, which appears to have been brought under Part 55, the stay presumably having been lifted (although this is not clear from the report). Perhaps a stay does not quite mean what it says in every case, and tenants must prepare to fight more applications to lift the stay.

The full judgment can be downloaded here.